The ESOP Association Reacts to U.S. Department of Labor Launch of Employee Ownership Initiative to Promote and Expand Employee-Owned Businesses

Longstanding Priority of The ESOP Association Includes Creation of a New Division at DOL Specifically Tasked With Growing Employee Ownership in America

Washington, D.C. – The U.S. Department of Labor (DOL) has officially launched the Employee Ownership Initiative, as required by the WORK Act which was signed into law last year. In a major win for employee ownership and future ESOP formation, DOL is creating a new division within the Office of Outreach, Education and Assistance at the Employee Benefits Security Administration (EBSA) to fulfil its Congressionally mandated obligation under the WORK Act to promote and grow employee-owned businesses. The Employee Ownership Initiative is authorized to receive up to $50 million over 5 years to promote employee ownership. In addition, DOL also announced it will issue formal guidance on the valuation of company stock purchased by an ESOP upon formation. Known as the Adequate Consideration Exemption, this mandate was also included in the WORK Act and is the most important policy priority of The ESOP Association.

According to the Department of Labor’s announcement, the Employee Ownership Initiative will support the creation and expansion of employee-owned businesses by:

• Supporting existing programs designed to promote employee ownership and facilitating the formation of new programs.
• Developing a clearinghouse of techniques applied by new and existing state programs and sharing information about these techniques with states.
• Providing education, outreach, and training to inform employees and employers about the possibilities and benefits of worker ownership and business ownership succession planning.
• Providing technical assistance for employee’s efforts to become business owners and helping employers and employees explore the feasibility of transferring full or partial ownership to employees.

“The Department appears to be taking the requirements of the WORK Act seriously and we are grateful that there is movement in the right direction in a timely way,” said Jim Bonham, President and CEO of The ESOP Association. “It remains to be seen, however, if EBSA can properly balance its enforcement and watchdog roles against the promotional aspirations of the WORK Act and the Employee Ownership Initiative. 

“For far too long, there has been a culture within EBSA that created and initiated obstacles to ESOP formation rather than finding meaningful and transparent solutions so more ESOPs can form and thrive,” Bonham continued. “Sadly, it has been generations of American workers who suffered the stifling effects of the culture at EBSA.  Business owners have become unwilling to expose themselves to EBSA’s investigatory and non-transparent tactics, and that means tens of thousands of American workers lost the chance to directly gain ownership from the value they have been creating at work.”

The Employee Ownership Initiative is a longstanding priority for The ESOP Association and enjoyed strong bipartisan, bicameral support led by Senators Bernie Sanders (I-VT) and Jerry Moran (R-KS), who worked closely with The ESOP Association and other stakeholders within the employee ownership community to draft and pass the legislation.

“Worker ownership arrangements help create pathways for employees to earn a fair share of the profits that their labor makes possible and will play a critical role in the Biden-Harris administration’s fight to give workers a voice on the job and a seat at the table,” said Acting Secretary of Labor Julie A. Su. “This new Department of Labor initiative is an important step in implementing President Biden’s economic plan to empower workers and grow the economy from the middle out and the bottom up — not the top down.”  The release from the DOL also notes it will hold “stakeholder meetings to gain important feedback on how to best achieve the initiative’s goals and carry out the division’s activities.” 

Regarding DOL’s announcement on issuing formal guidance for adequate consideration, Bonham said: “We continue to urge DOL to move forward with a formal notice and comment rulemaking that involves stakeholder and public input that must be factored into a final regulation, as the DOL committed to in its April letter to The ESOP Association.”

About the ESOP Association 

The ESOP Association is the largest organization in the world supporting employee-owned companies, the more than 10 million U.S. employees who participate in an ESOP, and the professionals who provide services to them. Headquartered at the International Employee Ownership Center in Washington, DC and operating as a 501(c)6 organization with the affiliated Employee Ownership Foundation, The ESOP Association conducts and funds academic research, provides more than 160 annual conferences and events attended by nearly 15,000 individuals, and advocates on behalf of employee owners and their businesses to federal and state lawmakers.

For Media Inquiries, Contact: 

Demetrios Karoutsos
dkaroutsos@esopassociation.org
Senior Director, Marketing & Communications